What happens here, is that your 27.5 year depreciation starts all over from year 1, based on the "adjusted" cost basis.
Your adjusted cost basis is determined by subtracting all the depreciation you took between 12/1/1990 and 10/1/2016, from the original cost basis used for figuring that depreciation. This becomes your "new" cost basis on the 2020 tax return, and depreciation starts all over. Note that you will adjust the cost basis on the structure and other depreciated assets only. You will not change the cost basis of the land. Thats because land is never depreciated. This can be tricky to understand with the TurboTax program. But it's like riding a bike. Once you "get it" then you've "got it"
Example:
In 1990 the original cost basis of the property was $100,000. Of that, $70K was allocated to the structure and $30K was allocated to the land. Only the $70K gets depreciated over the next 27.5 years.
In 2016 the property was converted back to personal use. Up do the date of conversion the total amount of depreciation taken on the property was $35K.
In 2020 I covert the property back to rental. I have to subtract the $35K of depreciation already taken, from my cost basis. So now my "adjusted" cost basis on the property is $65K
In TurboTax 2020 I enter $65,000 in the COST box, and I enter $30K in the COST OF LAND" box. Note the cost of the land did not change. The program will "do the math" and allocate the $35K difference to the structure. Now that $35K is what will be depreciated over the next 27.5 years, with tax year 2020 being year 1 of depreciation.
